Wol (London) LLP v Croydon Investments Limited & Ors
[2024] EWHC 251 (TCC)
Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP)
9 July 2024
[2024] UKSC 23
Supreme Court
A company built a care home and gave a promise (a collateral warranty) to the tenant that the work was and would be done properly. A dispute arose. The court decided that the promise wasn't a legally binding contract that allowed for a fast-track dispute resolution process unless it had a separate promise to do work for the tenant, not just the original owner. This overturns a previous court case and makes it clearer for builders and tenants to understand when the fast-track process applies.
Key Facts
- •Abbey Healthcare (Mill Hill) Ltd (Abbey) leased a care home from Toppan Holdings Ltd, which had acquired it from Sapphire Building Services Ltd.
- •Simply Construct (UK) LLP (Simply) built the care home under a JCT Design and Build Contract with Sapphire.
- •Simply provided a collateral warranty to Abbey concerning the works carried out.
- •Fire safety defects were discovered, leading to disputes between Abbey, Toppan, and Simply.
- •The central issue is whether the collateral warranty is a "construction contract" under the Housing Grants, Construction and Regeneration Act 1996 (the 1996 Act), allowing adjudication.
Legal Principles
Definition of 'construction contract' under section 104(1) of the 1996 Act: an agreement for carrying out construction operations.
Housing Grants, Construction and Regeneration Act 1996
The purpose of the 1996 Act is to improve cash flow and streamline dispute resolution in the construction industry.
C Spencer Ltd v M W High Tech Projects UK Ltd [2020] EWCA Civ 331
A collateral warranty can be a construction contract, but only if its object or purpose is the carrying out of construction operations.
This case's judgment
The word "for" in section 104(1) indicates the purpose of the agreement; the contractor must undertake a direct contractual obligation to carry out construction operations.
This case's judgment, particularly Stuart-Smith LJ's dissenting judgment
Outcomes
The appeal is allowed.
The Abbey Collateral Warranty is not a construction contract under section 104(1) of the 1996 Act because it only warrants Simply's performance of obligations owed to the employer under the building contract; it does not create a separate and distinct obligation to carry out construction operations for Abbey.
Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013] EWHC 2665 (TCC) is overruled.
The court finds that Parkwood was wrongly decided. The focus should be on whether the collateral warranty creates a separate and distinct obligation to carry out construction operations, rather than the specific wording used.